TEGNA (TGNA) 7 Nov 24 2024 Q3 Earnings call transcript

In the latest earnings call, TEGNA, a leading media company, presented its third quarter results for 2024, highlighting significant achievements and future strategies. The call, led by CEO Mike Steib and CFO Julie Heskett, outlined the company's performance and provided insights into its strategic initiatives.

Financial Highlights and Challenges

TEGNA reported a 13% year-over-year increase in total company revenue to $807 million, surpassing the estimated 9% to 12% growth. This growth was attributed to political advertising and an uptick in advertising and marketing services revenue (AMS). Despite a slight decrease in subscription revenue, TEGNA's core linear advertising showed growth, particularly due to the Paris Olympics. The company's strategic footprint in key battleground states has proven to be vital, with record political revenue reported for the third quarter and a robust political advertising year-to-date, showcasing the durability of broadcast advertising.

However, the company faces challenges in the form of declining traditional MVPD subscribers and softness in certain categories like automotive, retail, and home improvement. The decline in subscription revenue, which dropped 6% year-over-year to $356 million, is a cause for concern. TEGNA plans to renew approximately 20% of its traditional MVPD subscribers at the end of the year and 45% in 2025.

Strategic Initiatives and Future Outlook

CEO Mike Steib outlined a series of strategic initiatives aimed at enhancing TEGNA's competitive edge. These include strengthening the company's team and leadership system, reviewing organizational structures and processes, leveraging technology to improve processes, expanding reach through digital channels, and scrutinizing every expense to ensure smart investments. Steib's focus on operational efficiency and strategic capital allocation is expected to yield significant benefits, including cost savings, revenue growth, and improved user engagement.

Financial Guidance and Capital Allocation

Julie Heskett provided an update on TEGNA's financial results, highlighting the company's commitment to returning between 40% and 60% of adjusted free cash flow to shareholders over the 2024 and 2025 period. TEGNA has returned approximately $286 million to shareholders year-to-date, keeping it on track to meet its commitment of returning approximately $350 million in 2024. The company's net leverage finished the quarter at 2.8x, below the 3x annual guidance.

Looking Ahead

TEGNA expects total company GAAP revenue to be up 19% to 21% year-over-year for the fourth quarter, driven primarily by political advertising. The company projects a 1% to 3% increase in total non-GAAP operating expenses for the fourth quarter, driven by growth in programming and Premion. Despite the challenges, TEGNA remains optimistic about its future, with a reaffirmed full year 2024 key guidance and a combined 2024, 2025 adjusted free cash flow guidance of $900 million to $1.1 billion.

Conclusion

TEGNA's third quarter performance showcases both challenges and opportunities. The company's strategic initiatives, coupled with its focus on operational efficiency and capital allocation, position it well for future growth. Despite facing declining subscription revenue and softness in certain categories, TEGNA's strong performance in political advertising and its strategic footprint in key battleground states highlight the resilience of broadcast advertising. As TEGNA continues to navigate the digital transformation of media and advertising, its strategic initiatives and focus on operational efficiency are expected to yield significant benefits.